To reduce the expenses of company is big challenge of management team of company. Accounting team can help in it if accountant knows how to reduce the expenses. You know that accountant can find income statement of company daily basis.
Now on this basis following reducing 3 ideas can be used.
1st Idea : Company will Keep Cash basis Income Statement
Yes, as per legal accounting rules, company should make the income statement on the basis of accrual. It means, whether company receive or not when sold, it is sale. So, both and cash and credit sale will include in it and like this both credit and cash buying will include in expenses. That is also logical but not so helpful for reducing expenses.
Now, company's accountant has to make one more income statement on the basis of cash basis. Here, I am clearing that it is not possible in cash book or bank account of company because both will also show capital and revenue items. We need to show only this year expenses not our investment or sale of investment in cash basis income statement. Now, two side will clear show. How much we have earned particular date in the form of cash and what we already spent on particular date for our expenses. If our paid expenses are more than our received incomes. It means, it is the time of company to stop the expenses because company has spent more than cash received from sale or other ways of earning.
Now, Company has to determined two way
1. Company will not spend upto new cash receive from incomes.
2. Company will adjust first past paid expenses from future cash receive from income. With this, company will make the habit to keep expenses under received cash from earning. With this idea, company can reduce its expenses.
2nd Idea : Company Show Have Manage Employees Expenses Wisely
By Making strict budget of employees salary and other services expenses, company should not cross the line. Every employee has natural desire to earn more from company. Company has to give salary on the basis of their targets. No target no salary. Target means goal of company. If company has goal to increase sale. Employee is failure to do so. Company has to remove such employee from company if company has to reduce such expenses. Because scrap product will reduce the quality and standard of company. Any employee who is lazy, will be punished through this system. With this, company can pressure on employees and increase its income and decrease its expenses.
3rd Idea : Spend Budget Based Expenses
Company has to spend all expenses on budget basis. Company's account department has to make a big company's desire account book. In this account book, everyday, every desire of company should be noted whether it is capital nature or revenue nature. For example, company wants to buy big machine. But its past cash and current earning cash is limited to survive the operating of current expenses. So, if company will stop this desire by seeing this account book, it will reduce expenses with following way.
1. Current expenses are used for better revenue. If current expenses will stop, potential of income will stop.
2. Company is unable to pay current expenses if company buy the machine. But same machine will also need some maintenance expenses. So, not paying such expenses, company's useful fund will be wasted because idle of machine and it will surely increase the expenses of company. So, decision on the basis of desire may be harmful for company.
